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5 Important Things to Know When Preparing to Lease a Retail Space When leasing a retail space, understanding what landlords look for is crucial for business owners.

By Roxanne Klein

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Securing a retail space is a significant milestone for any business owner. However, landlords are crucial in determining who gets to lease their property. It can be very competitive to lease certain spaces. In the market that I focus on — the Inland Empire region of Southern California — our vacancy rate is currently at 6.1%, the lowest it has been in 15+ years. Furthermore, out of that 6.1%, many spaces are not prime retail spaces.

To make an informed decision, landlords carefully evaluate several factors when assessing potential tenants. In this article, I will delve into the key considerations landlords look for when leasing a retail space. I'll explore the importance of a solid business plan, a comprehensive marketing strategy, a compelling pitch deck, relevant industry experience, creditworthiness and the applicant's net worth.

1. Business plan: The blueprint for success

Landlords place considerable emphasis on the business plan presented by potential tenants. A well-developed and detailed business plan demonstrates that the applicant has thoroughly considered all aspects of their venture. The plan should provide an overview of the business concept, target market analysis, competition assessment, financial projections and growth strategies.

A strong business plan showcases the tenant's ability to set realistic goals, navigate potential challenges and make informed decisions. It reassures landlords that the tenant has a clear vision for their business and is committed to its long-term success.

Related: The 5 Types of Landlords Businesses Will Encounter

2. Marketing plan: Driving foot traffic

An effective marketing plan is crucial in attracting customers and generating foot traffic to a retail space. Landlords seek tenants with well-defined marketing strategies to promote their business and drive sales.

A comprehensive marketing plan should outline the tenant's understanding of the target market, competitive positioning, branding strategies, advertising channels and customer acquisition tactics. Demonstrating a proactive marketing approach reassures landlords that the tenant can maximize the potential of the retail space and contribute to its overall success.

3. Pitch deck: Communicating vision and viability

Landlords often require a compelling pitch deck to assess applicants' ability to visually articulate their business concept and viability. The pitch deck should succinctly convey the tenant's vision, unique selling propositions, financial projections and growth strategies. It should be visually appealing and engaging, highlighting the business's key strengths.

An effective pitch deck demonstrates the tenant's ability to communicate their ideas, present a persuasive case for their business, and align their goals with the landlord's objectives. A well-crafted pitch deck enhances the tenant's chances of making a favorable impression and securing the desired retail space. Additionally, you will benefit from having your website professionally designed and ready to go when you look for your retail location.

4. Experience: Demonstrating industry knowledge

Landlords value tenants with relevant industry experience and a proven track record of success. Previous experience demonstrates the applicant's ability to navigate the unique challenges of the retail sector, make informed decisions, and adapt to changing market conditions. While experience is not always a strict requirement, it can assure landlords that the tenant possesses the necessary skills and knowledge to manage and operate a retail space effectively. It showcases the tenant's understanding of industry-specific dynamics, customer preferences, and operational efficiencies, which can contribute to the success of both the business and the retail property.

If you want to open your first retail location, be ready for the question: Do you have any existing locations? This question will come up frequently, and you should be prepared with your answer. A good answer to not having any retail locations is a solid track record of being a long-term manager at a similar type of business you plan to open.

Related: What to Know When Leasing a New or Existing Space

5. Creditworthiness and net worth: Financial stability

Financial stability is a critical factor for landlords when evaluating potential tenants. They assess creditworthiness and often request financial documents to ensure the applicant has a history of fulfilling financial obligations. A strong credit history demonstrates the tenant's ability to manage finances responsibly and meet rental obligations on time. Landlords may also consider the applicant's net worth, which indicates their overall financial strength and ability to weather unforeseen challenges. A financially stable tenant instills confidence in the landlord that the rent will be paid promptly, ensuring a stable income stream and the long-term success of the retail property.

I often have tenants ask me what the landlord's requirements are regarding finances. It is important to understand that there is no magic number. Landlords will look at your finances as a whole package to decide. You can note, though, that owning a home with a significant amount of equity, enough savings in the bank for your build-out or to qualify for a loan, and as little debt as possible will assist.

When leasing a retail space, understanding what landlords look for is crucial for business owners. I recommend that tenants looking to lease a retail space do their homework in advance and have the necessary information ready for when they find their perfect space. The last thing a tenant would want to do is ruin their chances of securing their location by being improperly prepared.

Roxanne Klein

Entrepreneur Leadership Network® Contributor

Retail Commercial Real Estate Broker

Roxy Klein is focused on the leasing and sale of retail commercial properties in Southern California's Inland Empire and San Gabriel Valley regions. Her expertise includes leasing, sales, & landlord / tenant representation. Roxy's performance on Crexi puts her in the top 1% of all users.

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